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AI: False Savior of a Hollowed-Out Economy August 27, 2025
What nobody seems to notice is all the incentives for deploying AI are perverse.
The real story of the US economy isn't about AI, it's about an economy that's run out of rope. AI is being hyped not just by promoters reaping billions of dollars in stock market gains, it's being hyped by the entire status quo because it's understood to be the last chance of saving an economy doomed by the consequences of decades of artifice. The real story of the US economy is that decades of "financial innovations" finally caught up with us in 2008, when the subprime mortgage scam--a classic example of "financial innovations" being the cover story for greed and fraud running amok--pulled a block from the global financial Jenga Tower that nearly collapsed the entire rickety, rotten structure. Our political leadership had a choice: clean house or save the scam. They chose to save the scam, and that required not just institutionalizing moral hazard (transferring the risks of fraud and leveraged speculation from the gamblers to the public / Federal Reserve) but pursuing policies--zero interest rate policy (ZIRP), quantitative easing, increasing the money supply, and so on--that had only one possible outcome: An economy permanently dependent on inflating asset-bubbles that enriched the top 10% while the bottom 90% who depend on earned income fell behind. The desired goal of permanent asset-bubbles is the "wealth effect," the cover story for transferring all the gains into the hands of the top 10%, who can then go on a spending spree which 'trickles down" to the bottom 90%, who are now a neofeudal class of workers serving the top 10% who account for 50% of all consumer spending and collect 90% of the unearned income and capital gains. This arrangement is inherently unstable, as "financial innovations" suffer from diminishing returns. Eventually the debt-serfs can no longer borrow more or service the debt they already have, and every bubble being bigger than the previous bubble guarantees the next implosion will be larger and more devastating than the previous bubble-pop. So what does a system that's run out of rope do? Seek a savior. The rope has frayed, and the rocks are far below. The impact is going to be life-changing, and not for the better. The choice remains: clean house, end the bubble-dependent frauds and scams, or find a way to inflate yet another credit-asset bubble. Clean house and lose all our bubble-wealth? You're joking. The solution is to blow an even bigger bubble. Hey, it's worked great for 17 years. Never mind that the precarity of the bottom 90% is accelerating as both the state and Corporate America have offloaded risks onto households and workers; they have OnlyFans, 24% interest credit cards, zero-day-expiration options and side hustles to get by. Never mind that for many Americans, basic services are on the same level as impoverished developing-world economies. What matters is maintaining the wealth of the few at the expense of the many, by any means available. Enter the savior of our asset-bubble-dependent elites: AI. AI is going to change the world, we'll all be watched over by machines of loving grace, profits and capital gains will be in the trillions of dollars, yowza, because we'll fire half of you and give you enough Universal Basic Income (UBI) to scrape by, and some of you can join our security teams protecting us from the impoverished rabble. There's just one teeny little problem: AI is a false savior. It doesn't work as advertised, it has multiple inherent limits that can't be overcome by scaling up processors, and the dystopian consequences of even this first wave are already uncontrollably destructive: AI psychosis and addiction to AI chatbots is making users even lonelier and more isolated than they were before embracing AI, AI Slop is overwhelming legitimate content, AI agents are just good enough to degrade already pathetically deficient corporate services, LLM models are Swiss-cheese security risks, and 95% of all corporate AI projects founder. What nobody seems to notice is all the incentives for deploying AI are perverse. Those seeking nickels from Big Tech platform engagement / views win big by flooding the web with AI slop, scammers and fraudsters now have much more powerful tools to deceive and defraud (deepfake videos and voiceovers), and rather than watch over us with loving grace, the AI systems are scraping their own inaccuracies and hallucinations and deceptively presenting this slop as accurate. The status quo is counting on AI to be the savior of a hollowed-out economy, but it's a false savior. The frenzy has inflated another credit-asset bubble as planned, but another bubble that enriches the few isn't going to fix what's broken. Rather, unleashing AI tools in a system of perverse incentives is accelerating the decay and collapse of the entire system by replacing authentic value with illusions of value--what I call Ultra-Processed Life. I hate to be the bearer of unwelcome news, but enriching the few at the expense of the many is the problem, not the solution. So the AI bubble mints more billionaires, well that's swell, but the process of inflating bubbles that enrich the few is what's destabilizing our economy and society. This chart presents the consequences of 17 years of bubble-inflation "wealth effect": wealth for the few and "effects" for the many: 
Asset bubbles have been good to the top .01%: 
And it's been good for the top 10%, too: $107 trillion in net worth, and of course, "I earned every penny of it." The bottom 50% with $4 trillion--well, better launch your OnlyFans site, even though there are already millions of other desperate people hoping to scrape up a few bucks by selling themselves online. 
Contrary to the hype, AI isn't the savior of the bubble economy--it's the hype-heavy straw that breaks it for good. Before we bow down and worship a false savior, it's probably a good idea to learn about the limits of our AI savior and the self-serving hype, and the banquet of consequences being laid for true believers. MIT report: 95% of generative AI pilots at companies are failing LLMs + Coding Agents = Security Nightmare AI Is a Mass-Delusion Event The potential of generative AI for personalized persuasion at scale What If A.I. Doesn't Get Much Better Than This? The Real Demon Inside ChatGPT ChatGPT May Be Eroding Critical Thinking Skills, According to a New MIT Study AI Industry Nervous About Small Detail: They're Not Making Any Real Money Which jobs can be replaced with AI? Jobs that have already be degraded to the point of uselessness. I've written 17 essays on AI this year: here are four: AI: Over-Promise + Under-Perform = Disillusionment and Blowback Maybe AI Isn't Going to Replace You at Work After All Good News! AI Can Do More BS Work AI Is a Mirror in Which We See Our Own Reflection Check out my new book Ultra-Processed Life and my updated Books and Films. Become a $3/month patron of my work via patreon.com Subscribe to my Substack for free My recent books: Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site. Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) audiobook Read the Introduction and first chapter for free (PDF) The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, audiobook, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF) Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF) When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF) Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF). A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF). Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $3.95, print $12, audiobook) Read the first section for free (PDF). The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF) Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free Become a $3/month patron of my work via patreon.com. Subscribe to my Substack for free Ultra-Processed Life print $16, (Kindle $7.95, audiobook, Hardcover $20 (129 pages, 2025) 
Ultra-Processed Life: the substitution of a synthetic, commoditized, very profitable facsimile for what was once authentic. Ultra-Processed Life is my term for everything that is analogous to ultra-processed snacks: attractively marketed, instantly alluring, easy to consume, addictive by design, tasty in the moment but harmful over time, its origins a black box of unknown processes, the brightly colored product bearing no resemblance to the real-world ingredients, an idealized form of what is inherently imperfect, untethered from the natural world or the future, disconnected not just from the consequences of our consuming the snack but disconnected from the consequences unleashed by those consequences. This book recounts my journey of discovery of how our everyday realm has drifted away from the foundations of human life and happiness without our noticing. As with many others, the catalyst for my exploration was a life-threatening medical crisis that did not have a specific cause. This led me to wonder if our entire way of life is like an ultra-processed snack: tasty but not healthy, edible but stripped of the nutrients we need to be healthy, addictive by design. Read the Introduction and first chapter Reader Jeff H. "Having this book during the life stage of middle age and two teens coming of age couldn't be better-timed. Smith makes a compelling case for us to refocus on what truly matters: community, meaningful work, and simply starting a small vegetable garden. Getting out of the rat race can be done locally and incrementally. It just takes a willingness to experiment, connections with others and a large dose of patience. There is a big difference between blame and responsibility. We may not be to blame for our current predicaments in modernity, but the responsibility is ours (responsible = response-able; able to respond). It is our duty to instruct the next generation about the reality of the situation and guide them along a better path." The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $20, (Kindle $9.95, Hardcover $24 (215 pages, 2024) audiobook, Read the Introduction and first chapter for free (PDF) 
What if growth--and policies to accelerate growth--are no longer working because our fix for every problem--growth at any cost--is failing? We're told Progress is inevitable as a result of technology, but everyday life is getting harder, not easier--the opposite of Progress, what I call Anti-Progress.
What if the real source of the unraveling is far deeper than economics or politics? What if the problem is what we see as the inevitable destiny of humanity--Progress--is actually a modern mythology, disconnected from the real-world consequences of growth for growth's sake? We indignantly reject that Progress is a mythology, but our need for mythology hasn't gone away because we've mastered technology; we've created a modern mythology of technology that is heedless of its own consequences. To truly progress, we need a new mythology aligned to 21st century realities. That's the goal of this book. Read the Introduction and first chapter for free
Recent entries: AI: False Savior of a Hollowed-Out Economy August 27, 2025 Our Mafioso Economy August 25, 2025 How Great Powers Fall Apart August 21, 2025 AI Is a Mirror in Which We See Our Own Reflection August 17, 2025 Boiled Frogs: AI Slop, Phishing, Deep-Fakes and Spam, Spam, Spam August 15, 2025 Two Charts of Extremely Perverse Incentives August 13, 2025 If It Walks Like a Duck: Is The AI Mania a Psych-Ops? August 11, 2025 Now Comes the Hard Part August 9, 2025 What Would Happen If Sydney Sweeney Started Gardening and Baking Bread? August 8, 2025 Resilient, Self-Reliant Life Is Hard August 6, 2025 Two Ways to Fix Generational Wealth Inequality August 4, 2025
Go Ahead and Rage at Boomers, But the Problem Is the Entire Economic Order
August 1, 2025
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"There is no security on this earth; there is only opportunity." (Douglas MacArthur) "We are what we repeatedly do." (Aristotle) "Do the thing and you shall have the power." (Ralph Waldo Emerson) "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction." (E.F. Schumacher, via Tom R.) "He who will not risk cannot win." (John Paul Jones) "When we drink coffee, ideas march in like the army." (Honore de Balzac) "Progress is not possible without deviation." (Frank Zappa, via Richard Metzger) "Victory favors those who take pains." (amat victoria curam) "The man who has a garden and a library has everything." (Cicero, via Lee Bentley) "A healthy homecooked family meal and a home garden are revolutionary acts." (CHS) "Do you know what amazes me more than anything else? The impotence of force to organize anything." (Napoleon Bonaparte) "The way of the Tao is reversal" Or "Reversal is the movement of Tao." (Lao Tzu) "Chance favours the prepared mind." (Louis Pasteur) "Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill) "Where there is ruin, there is hope for treasures." (Rumi) "The realm of gratitude is boundless." (CHS, 11/25/15) "History doesn't have a reverse gear." (CHS, 12/22/15) Smith's Law of Conservation of Risk: Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some consequences will be intended, some will not. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences. (July 8, 2014)(thanks to Lew G. for retitling the idea.) Smith's Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only. The Smith Corollary to Metcalfe's Law (The Network Effect): the value of the network is created not just by the number of connected devices/users but by the value of the information and knowledge shared by users in sub-networks and in the entire network. (CHS, 4/6/16) My Credo of Liberation: I no longer care if the power centers of our society--the distant, fortified castles of our financial feudal system--are changed by my actions, for I am liberated by the act of resistance. I am no longer complicit in perpetuating fraudulent feudalism and the pathology of concentrated power. I no longer covet signifiers of membership in the Upper Caste that serves the plutocracy. I am liberated from self-destructive consumerist-State financialization and the delusion that debt servitude and obedience to sociopathological Elites serve my self-interests. (Thank you, Klaus-Peter L., for reminding me) "We've become a culture of excuses rather than solutions: solutions always require sustained effort and discipline." (CHS 4/9/16) "Fraud as a way of life caters an extravagant banquet of consequences." (CHS 4/14/16) "Creativity = problem solving = value creation." (CHS 6/4/16) "Truth is powerful because it is the core dynamic of solving problems." (CHS 7/21/17) "We live in a system of human emotions that masquerades as a science (economics)." (CHS 1/1/18) "Always remember, your focus determines your reality." (George Lucas) "Diversity is for poor people. Sameness is for the successful." (GFB) "When power dissipates suddenly, it dissipates completely." (CHS 7/14/19) "Disobedience is the true foundation of liberty. The obedient must be slaves." (Henry David Thoreau) "Markets cannot price in the value of non-monetized natural assets such as diverse ecosystems." (CHS 7/14/19) "Magical thinking isn't optimism, it is folly." CHS 1/3/22) "Tune in (to self-reliance), drop out (of hyper-consumerism and debt-serfdom) and turn on (to relocalizing capital and agency)." (CHS 1/5/22) "The path to everything you desire starts here: like yourself as you are right now." (CHS 11/20/22) "There are only two signals: how many essentials you produce and share and if you're consuming less with better results. Everything else is noise." (CHS 12/17/22) "Liberation is no longer needing any confirmation or feedback from others or the world for one's sense of self. Wealth, fame, recognition, admiration, praise, prestige, approval, sainthood, martyrdom, success: none are needed, none are desired." (CHS 12/26/22) "When fame, wealth, prestige, status and glory are out of reach, you're free to pursue other more valuable things." (CHS 2/6/22) "It is the sacred duty of every activist who seeks to better their community to grow and share as much life-giving food as is humanly possible." (CHS 6/15/23) "Being anonymous, gray and unknown is the ideal state of freedom." (CHS 3/15/24) "We seem to have entered a world of anti-leisure and anti-productivity in which the unpaid shadow work demanded to keep all the complicated digital bits in motion obliterate our leisure and productivity." CHS (5/22/24) "It is axiomatic that failing systems work the best just before they fail catastrophically." Ray W. "Looking younger is mere technique; thinking younger demands creativity." CHS (10/16/24) "Tell me what's taboo and I'll tell you the truths that threaten the status quo." CHS (12/15/24) "This is the core of the Attention Economy: the ultimate addiction is the addiction to ourselves." CHS (1/28/25) "If You Seek the Truth, Look for What's Taboo." CHS (7/18/25) "My definition of self-reliance: the less you need, the easier it is to get what you need." CHS (7/26/25) "Mastery requires reading and doing." CHS (7/28/25) "The replacement of authentic value, quality, agency, choice, trust, legitimacy and experience with self-serving facsimiles is the key dynamic of Ultra-Processed Life, my term for the present-day human condition." CHS (8/12/25) "Ultra-Processed Life replaces an authentic experience with a synthetic, simulated, commoditized, highly profitable version that's superficially attractive but destructive over the long term." CHS (8/12/25) "What we see everywhere is the replacement of authentic things--including democracy--with synthetic facsimiles designed to maintain the illusion of choice and value." CHS (8/12/25) |
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